An appraisal is required on any home loan purchase transaction to show the current market value of the property. With a USDA home loan, the appraisal is ordered through an appraisal management company that locates an appraiser to go out and appraise the property.
USDA appraisals generally range in costs from $450 to$ 550 depending on the area and appraiser availability. This is an expense charged to the buyer’s credit card directly from the appraisal management company. A copy of the appraisal report is delivered to you upon receipt. Appraisal reports are typically good for a period of 90-120 days.
USDA appraisals follow FHA/HUD Guidelines and must be performed by an FHA licensed appraiser. In the body of the appraisal report, the appraisal must state the property meets FHA/HUD Handbooks 4905.1 and 4905.2.
All utilities to the property need to be on when the appraiser goes out to complete the visual inspection. If the utilities are not on, the appraiser is not able to test the electrical and mechanical systems to ensure they are functioning properly and will need to go back out for a final inspection once the utilities are turned on. Most appraisers will charge the homebuyer an additional fee ranging from $100-$150 for the final inspection so it is very important to check with your realtor and/or seller to verify all utilities are on prior to the appraisal inspection.
If the property you select has a pool, the appraiser is not allowed to give any value to the pool that will contribute to the total property value. This can be a potential issue if the value of the home without the pool is less than the sales price. This would require the homebuyer to bring the difference between the property value and the sales price to closing.
USDA will not guarantee a home loan if a property is located in a 100 year flood plain. Ensure to check with your realtor and/or seller if property is in a 100 year flood plain before submitting an offer.
Last but not least, property must be located in an eligible area. You can easily verify if a property is eligible or not by going to USDA Property Eligibility.
Check with your USDA Home Loan Specialist if you need any assistance determining property eligibility.